Leadership

I wore a cheap red wig over my blonde hair and boy oh boy were there compliments. Everybody loved the red colour on me: friends, fiancé, and kids. So after much deliberation, yesterday I asked my colourist for Amy Adams red and, by George, I got it.

I loved the results. The others in the salon loved the results. My fiancé loved the results. It was bold and better suited my personality than the Book Cover Blonde I’ve been sporting for three decades. But then I picked up my kids from school. In spite of liking the red wig, my daughter was not thrilled with the new look as my hair colour no longer matched hers. My son hated it because I didn’t look like me anymore. People were Not Happy and it got me second guessing the results too.

But of course…

As someone with expertise in change management, I get the theory in spades. People don’t like change. They especially don’t like change that they believe affects them and over which they were not consulted. I’d talked in broad terms about going redder but had not discussed any specific plans with my kids. As my daughter said, “it would be different if I’d known you were going to the salon today.” People like to be informed if there is change on the horizon, no matter how small that change might be. I had underestimated how such a minor change to me (I can always change it back, I figured) might be so major to my kids. My daughter likes it when people point out how similar we look and she feared she might be losing that. My son is big on stability and relies on me looking the same when I pick him up from school as I did when I dropped him off. To me, it was “just hair colour” but to them it was something more.

It reminded me of how our local newspaper reacted to the closing of Target Canada.

“Oakville store among 133 Target closes in Canada,” the headline read. When I first saw it, it made me chuckle. Well of course the Oakville store is closing: Target is closing all the Canadian stores. It’s not like Target is deliberately targeting (!) Oakville. But Oakville loved its Target store. The mall where the Target is located is renovating based on Target’s presence. Lots of Oakville residents were employed by the chain. So for Oakville, losing our Target store feels personal. It feels like we are somehow being singled out even when we aren’t, and we can only think of the change in terms of how it it feels to us.

In my book, Engage the Fox, I talk about the importance of stakeholder involvement at all stages of the decision making process if it is important that the stakeholders embrace the decision. Sometimes involvement is not possible such as in the case of Target (layoffs rarely take into account the feelings of the employees because the ex-employees are no longer stakeholders.) Sometimes involvement is possible such as in the case of my hair. If you need to have stakeholder cooperation in order to make a decision work, those stakeholders need to be engaged from the beginning and feel they are part of the process. This is critical for small decisions as well as for major ones.

Had I involved my kids in the process, it would have made the change more fun for them. And when I greeted them in the car, they’d likely have been excited rather than shocked and appalled. I would not have had doubts about my decision based on their reaction. It was a great reminder that even when we understand change theory well, it’s important to put that knowledge to to work in all parts of our lives. That way, we won’t be surprised when people do not react the way we expect them to in decisions both large and small.

Milton Friedman, the famed University of Chicago economist who was Reagan’s economic advisor, even posthumously continues to court controversy. Rand Paul thinks he should chair the Fed in spite of the fact he is dead. Container Store CEO Kip Tindall, on the other hand, felt compelled to write, when he filed his IPO in October 2013, “Milton said the only reason a corporation exists is to maximize the return of the shareholder. Well, with all due respect to Milton, at The Container Store we have found that if you take better care of the employees than anybody else, they really will take better care of the customers than anybody else.” Like Tindall, Simon Sinek, whose book, Leaders Eat Last, I generally adored, also seems to blame Milton Friedman for the current emphasis on increasing shareholder value at all costs, basing his criticism on Friedman’s infamous quote in his book Capitalism and Freedom in 1962 and requoted in Friedman’s article in the New York Times Magazine in 1970:

there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

Certainly Sinek ‘s reaction is not surprising. Current corporate executives and boards have used Friedman’s words to justify the use of dead peasant policies, double Irish tax structures, regular pre-year-end layoffs and other socially toxic tactics as ways to boost the bottom line. Friedman has become synonymous with the idea of profit over people.

The thing is, Friedman was not against corporations doing socially responsible things. He was against corporations doing socially responsible things for the sake of social responsibility. As an economist, he was keenly interested in principle-agent problems and, as such, was against corporate executives, in their public role as agents of the corporation, doing anything other than acting in the best interests of the company. He clarified his point:

The executive is exercising a distinct “social responsibility,” rather than serving as an agent of the stockholders or the customers or the employees, only if he spends the money in a different way than they would have spent it. [Emphasis mine.]

In his statement, Friedman was simply highlighting agency dilemma rather than making a statement that it’s wrong to do anything right. His words only look horrifying when taken in a post-Enron/Tyco/Goldman Sachs context, when the thought of a corporation so eager to do good that it acts contrary to its own self-interest seems ludicrous.

Many employees are stock holders by virtue of their compensation plans and, as such, want to see their company’s stock appreciate in value. What employees object to is when they see business leaders making decisions that act contrary to the interests of customers or employees in order to increase their own bonuses. The objection is not to a focus on shareholder value; the objection is, to borrow from Sinek, leaders eating first. Based on his writings, Friedman would object to any CEO who sacrifices the long term well-being of a company’s key stakeholders in order to line his pockets.

Friedman would argue that, no matter what, an executive should act as agent. And therefore if she is making any decision that compromises the long-term sustainability of the company she is not doing her job. Friedman would be just as opposed to executives making poor company decisions for personal gain, as he would be to executives making poor company decisions in the name of social justice. He never would have supported eliminating key jobs, failing to invest in people, allowing morale to sink, treating clients as unwitting counter parties, and hiding poor financial results, as these practices are never good for company sustainability.

Of course, in practice the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions. To illustrate, it may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects.

The problem with Friedman’s comments on the role of corporate leadership is not his philosophical point of view. The problem is his profession. Corporate executives are neither principals nor agents. They flesh and bone human beings with hopes and dreams and fears and mortgages to pay and complex brains and endocrinological systems. To see people as theoretical constructs is the classic mistake of management theory and why, after 120 years or so of studying organizations, so little of the theory actually works. Shareholder value creation is a great idea, in theory: if a company is doing well, the stock price will increase. Of course, the stock price will also increase if there is stock manipulation or if an influential analyst changes his rating to a buy or if an executive slashes expenses to increase the value of his options. Looking to shareholder value as a way to measure the success of a company is a radical oversimplification that does not take human behaviour into account. Even Jack Welch, who is best known for his ability to create shareholder value, said, in an interview with the Financial Times in 2009, that focusing on shareholder value as a strategy was “the dumbest idea in the world.”

Sinek simply needed to point out is that, as human beings, we are always principals, even when we supposed to be acting as agents. The only path to long-term corporate survival is for leaders to align our principal and agent selves and work within our human limitations.

First, there is some exciting news on the book front. I received a copy of the final draft of Engage the Fox, which will be published in October 2014! I am looking forward to telling the behind the scenes story of Thaddeus P. Fox and The Toad Hollow Gazette.

On May 14, I had the pleasure of attending a simulcast of Leadercast 2014. For anyone who has not attended a Leadercast, it’s a day that features a broad range of speakers including Desmond Tutu, Laura Schroff, Malcolm Gladwell, Dr Henry Cloud, Andy Stanley, Simon Sinek, Bill McDermott, Laura Bush and others. The broadcast site is in Atlanta and there are 746 remote sites across 21 countries. In the past, Leadercast was geared towards a mainly Christian audience but they have shifted the audience to people interested in leadership in general. The only mention of religion came from Braveheart writer Randall Wallace who seemed to assume a Christian audience and, while entertaining, he did not seem to be as on message as the others. Leadercast focuses on Beyond You leadership and reinforced the emerging idea that the old way of making decisions focused solely on profit is not working anymore. In a study they commissioned from The Barna Group, they found that only 1 in 5 employers think they have a good leader and poor leadership is the reason most of them will leave their jobs. Too many companies kick down whereas good leaders put their teams first: “Let them rest, while you dig your boots in the mud and carry on,” a Leadercast video implored. Beyond You Leadership recognizes that it’s far better to grow legacy companies that will make a difference over the long term rather than to lurch from quarter to quarter. Here were some of the highlights of the day: Andy Stanley. Stanley is the lead pastor of North Point Church, but don’t let that put you off. He’s a heck of a leadership expert and his Leadercast talk was entirely secular in nature. He is very quotable and here are some of my favourites:

Beyond You leaders fearlessly and selflessly empower leaders around them as well as those coming along behind them. Beyond You leaders make as few decisions as possible and empower other people to make decisions. Beyond You leaders load people their influence and ask others, “What can I do to help?” Beyond You leaders empty their cups. Ask yourself what talents can you give away to bring up the next generation of leaders. If your leadership isn’t all about you, it will live beyond you.

Dr Henry Cloud. Dr Henry Cloud is a clinical psychologist who counsels CEOs about leadership. He has written some excellent books on setting boundaries both in and out of the workplace. I have started reading Boundaries for Leaders, which promises to be an excellent book about effective leadership. He emphasizes that leaders lead people: real human beings with brains and hearts and lives. He said, “The human heart, above all else, wants to be known and understood.” Leaders who understand this will have teams who are happy to follow them. Archbishop Desmond Tutu. The most delightful speaker was Archbishop Desmond Tutu. His laugh was absolutely infectious. He spoke about the leadership qualities of his good friend Nelson Mandela. I loved these particular quotes:

Imagine a world where leaders … had a pure motive of doing what’s right and improving the lives of all. A person is a person through other persons. You are you because of others.

Laura Schroff. Laura Schroff was the most moving of all the speakers. She wrote The Invisible Thread, the story of how her decision, as a young sales executive, to treat an 11-year old panhandler to lunch changed both their lives. She talked about personal leadership and how making transformational change does not always have involve grand gestures. My favourite quotes from her speech were as follows:

All we have to do is open up our eyes and heart to see the opportunity to help our lives and others. We can teach people to be kind, but we must live by example.

Malcolm Gladwell. I was most looking forward to Gladwell’s speech as his newest book, David and Goliath, talks about unlikely leaders who push through hardships and climb seemingly insurmountable obstacles. His talk focused on why people follow certain leaders. “The real reason people follow leaders is that they perceive that authority to be legitimate,” he said. People won’t follow a leader simply because of a job title. “Unless you enact authority in a way that is fair, respectful and trustworthy, people won’t follow your lead,” he said. Bill McDermott. McDermott runs SAP’s US operations. While his leadership style seemed a little more old school than the others (consistent with SAP’s reputation) he was an entertaining speaker. My favourite quotes were:

Everyone is so busy telling everybody what to do, they forget to listen.

The first thing that has to change is the headset about what’s possible.

Have an audacious, bold dream for who you are and what you mean to this world.

Simon Sinek. My favourite speaker was Simon Sinek, who wrote Start With Why and is a popular TED talk speaker. He defines leadership as “the daily practice of putting others before ourselves.” He talked about the golden circle where you start with asking the question Why. Rather than asking what do we want to sell, ask why are we in business? Why do people want to do business with us? Why do our employees want to come to work? Once the why is established, figuring how to do this and what products and services to offer is easy. I’ll be offering a review of his book shortly. Here are some of my favourite quotes from his talk:

Leadership is neither a rank nor a title: it’s a choice. Give employees the opportunity to be the leaders they wish they had. Leadership is a responsibility, not a rank. Military leaders eat last. Don’t refer to head counts, refer to heart counts. Are you going to reduce the number of hearts in your organization to balance your books? Leaders will sacrifice themselves so that others may gain. Take responsibility for your actions at the time you commit your actions, not when you get caught.

Next year, Leadercast is taking place on May 8, 2015. If you are interested in leadership, you may wish to consider it for your calendar.

The LEGO Movie is a delight for kids but it is equally delightful for adults (unless you like a lot of screaming in the background; try to see it in one of those 18+ mini-theatres where they show opera simulcasts and serve beer at your seat.) For all of the post-modernists in the room, it’s delightfully meta and highly ironic (an anti-business movie produced by a US$4 billion toy company – snort.) The script is tight, the voice acting is great, and there are lots of pop culture references spanning the last three decades. It’s good fun.

The movie also offers a number of lessons for business leaders about leadership, teamwork, and the important balance between vision and execution. ** Mild spoilers ahead if you are serious about watching the film for plot. **

The movie’s protagonist is Emmett, the prototypical Everyhuman. Emmett is driven by rules and routine, literally following his manual, Instructions to Fit In, Have Everybody Like You, and Always be Happy. He is indistinguishable from anyone else: he goes to work (he is, of course, a builder), watches the water cooler favourite “Where are My Pants?” on TV, and sings along to the number one song, Everything is Awesome. I haven’t seen that much cheerful uniformity since I interviewed for a job with a packaged goods company after completing my business degree.

One day at work, he accidently finds the Piece of Resistance that, according to a prophesy, marks him as The Special: “the most talented, most interesting, most special person in the universe.” He is the one who is to lead a group of Master Builders to overthrow Lord Business, who has threatened to destroy the world. The Master Builders are charged with coming up with creative solutions to life’s problems. The problem is, Emmett’s life has been so prescribed that he not use to thinking. Note this exchange with Master Builder Vetruvius and Lucy.

Vitruvius: We are entering your mind.

Emmet: What?

Lucy: I don’t think he’s ever had an original thought.

Emmet: That’s not true. Introducing, the double decker couch so everyone could watch TV together and be buddies.

Lucy: That’s literally the dumbest thing I ever heard.

Vitruvius: Let me handle this. That idea is just the worst.

The Master Builders “including but not limited to Superman, Wonder Woman, The Mermaid, Green Ninja, 1980s Something Space Guy, Michelangelo [the painter], Michelangelo [the teenage mutant ninja turtle], and the 2002 NBA All-Stars” are life’s visionaries. They are creative, natural leaders to whom people look in times of rapid change. I fully expected that Emmett would rise to the role and become some sort of LEGO-building Steve Jobs. But that’s where the movie surprises and is closer to business reality. While the Master Builders are smart and creative, they are not able to outwit Lord Business who seems one step ahead of them in anticipating their weapons. The group is in despair as they think that Emmett lacks the building savvy to save them. Emmett, however, is not to be underestimated.

Emmett: What does he [Lord Business] never expect Master Builders to do? … Follow instructions. You are so creative…but you don’t work together.

How often in business does a visionary swoop in to save the day, overlooking the work of long-term employees who have been living and breathing the company’s issues for years. So sure are visionaries in their own abilities, that sometimes they will not partner with other senior members of the team. Good leaders and managers bring about results through people. And a leader needs other people to execute her ideas, no matter how brilliant she might be. Unless people are engaged and committed to the plan (it helps if they are part of the planning process) they will not be excited about bringing any ideas to fruition. While cool ideas might get the media excited, a more effective business strategy might be to have highly engaged workers focus on something a little more tried and true. (1980s spaceship anyone?)

John Kotter has focused much of his career on distinguishing between leadership and management. He wrote a terrific piece for HBR that talks about how many are still using the two terms interchangeably. When they do differentiate between leadership and management, it tends to be along hierarchical lines: leaders are the folks at the top and managers are those in the middle. It’s why the term “middle leadership” is not as popular as middle management. But organizations should have middle leaders and lower leaders too. For an organization to succeed, they need leaders throughout.

To go back to Kotter’s helpful definitions: managers are people who manage the processes that keep an organization running well. They plan and budget. They decide how to assign the resources at their disposal. They execute the plan, monitor the progress, and put controls in place to make sure that risks are minimized. Then they analyze the results. Leaders are different. Whereas managers focus on historical and present results, leaders are future-focused. Leaders try to look into the future to see if and how that strategy needs to shift to stay competitive.

Leaders need to create a vision of the future and communicate that vision to everyone within the organization. They must motivate and inspire people to buy in to that vision. Without change, organizations eventually die and leaders are the people who make necessary change happen.But that vision does not have come only from the top. A branch plant can have a vision. A department can have a vision. A project team can have a vision. In fact, if the only driver of change is someone at the very top who makes 100 times the salary of the average employee, it will be hard to get everyone on board. The trickle down theory does not work for organizations particularly well: energy must be infused at all levels for change efforts to persist. If there are leaders at all levels of the organization who have bought into their own version of the vision and can encourage their teams to buy into it too, change is much less painful and more likely to stick.

The nice thing is, leadership can be cultivated at all levels. A leader can be the front line retail manager who knows when a staff member can go off script to satisfy a customer. A leader can be a sales manager who eases his team through a territory reorganization. A leader can be a project manager who has to expand the project’s scope. Companies are smart to recognize and reward leadership talent at all levels rather than limiting the practice of leadership to the executive suite.

Steve Jobs was undoubtedly a rock star in the business world. His ability to innovate and reinvent entire categories is unparalleled. He got people excited about phones, he convinced people to pay for music once again, and he moved his beautifully-designed niche computers into the mainstream. He got us excited about The Beatles. The Beatles! He made the entire industry more competitive, and companies that should seem creative and responsive look as though they are up to their boot tops in molasses by comparison.

Jobs prided himself on ignoring market research and formal strategic planning processes. And even though he was obsessive about managing the customer experience, he generally ignored what that customer wants, firmly believing the observation (attributed to Henry Ford) that “If I’d have asked my customers what they wanted, they would have told me ‘A faster horse.'” Like all good disruptors, he changed the game: when the world was demanding more and more processing power for computers, he decided that what people really needed was a stripped-down, portable tablet. He wasn’t wrong.

There are very few visionaries on this planet: fewer still who are able to capture the imagination of the public and their employees, and create value out of what seems like thin air. People like Mark Zuckerberg and Richard Branson and Steve Jobs are hard to replace, as professional managers — even those at the very top of their game — rarely bring the same level of passion to the job that seems ingrained in a founder’s DNA.

In 2008, Fortune magazine interviewed Steve Jobs and asked him how Apple would do without him: “We’ve got really capable people at Apple. I made Tim [Cook] COO and gave him the Mac division and he’s done brilliantly. I mean, some people say, ‘Oh, God, if [Jobs] got run over by a bus, Apple would be in trouble.’ And, you know, I think it wouldn’t be a party, but there are really capable people at Apple. And the board would have some good choices about who to pick as CEO. My job is to make the whole executive team good enough to be successors, so that’s what I try to do.”

Given that Jobs often spoke in hyperbole, his answer seemed tepid. Cook seems like a highly capable CEO, but all too often rock star leaders like Jobs are not particularly adept at succession planning. Jim Collins, in Good to Great, describes this style of leadership as the “genius with 1000 helpers”. Companies like Apple that serve as a “platform for the talents of an extraordinary individual” can run into trouble when that extraordinary individual leaves. Geniuses “seldom build great management teams, for the simple reason that they don’t need one, and often don’t want one.” When they depart, the company often stumbles.

Apple would be wise to take a page from companies that survived after the founder stepped down. There was, after all, a time when it was hard to contemplate Walmart without Sam Walton, Disney without Walt, or Sony without Akio Morita, but they all pulled through and saw great leaders like Michael Eisner and Norio Ohga flourish. The challenge will be to try to preserve what Jobs created — Apple’s Appleness, if you will — and continue to produce a suite of highly-desireable, beautifully-designed, innovative products and provide a customer experience second-to-none. Jobs’s successor will have to find a way to do this without simply attempting to mimic Jobs’s unique management style. Collins warns the rock star’s successors about this trap, which he bluntly labels: “trying to act like a genius, without being a genius.” In other words, if Cook starts to don black mock-necks and march around like a despot, no one will stick around.

While most of the “geniuses” Collins observed did not put a good succession plan in place, it’s never wise to underestimate Mr. Jobs. Just as he foresaw a purse-sized computer and an entire music and movie collection on a pocket-sized device, it’s likely he foresaw his departure too. Over the past few years, Apple has moved from niche to mainstream, has established itself as an industry leader, and has established a highly profitable business model. Jobs’s role as the iconoclastic underdog could not be sustained indefinately given the company’s huge success. new perspective might be exactly what is required to guide the company through its next phase.

Jobs and Apple will be forever intertwined and his legacy will be enduring. As Dumbledore said, in the second Harry Potter film, when it looked as though he was being deposed as leader of Hogwarts: “I shall never truly be gone unless none here are loyal to me.” Apple would be smart to stay loyal to Jobs’s continual push for excellence and his passion for beautiful design. The rest, however, can evolve until one day Apple is practically unrecognizable. Presumably the game-changing, ever-innovating leader would have wanted it that way…